Breakfast at Tiffany’s, anyone?
When it comes to innovation and the “cutting edge” of businesses entering Web3, luxury brands like Tiffany & Co (part of the LVMH group) are examples of brands boldly experimenting with a combination of blockchain-validated ownership with NFTs and real-world physical items.
Starting Friday, August 5, the iconic global jewelry brand Tiffany & Co. will launch an exclusive digital asset that they have coined an “NFTiff”.
Although anyone can mint an NFTiff for 30 ETH (roughly $50,000), only holders of both an NFTiff and a CryptoPunk will be able to redeem their NFT for a custom physical pendant.
Upon Tiffany’s accouncement, the trading volume of CryptoPunks increased significantly, up 1,847%.
What are “Phygital” Assets ?
Phygital assets are a new category of digital assets that not only bridge the gap between the physical and digital worlds, but ideally provide utility and benefits in both worlds.
As a simple example, an artist could create a physical work of art, produce a digital representation of the art, then “mint” the digital version of it as an NFT with ties or rights to the physical or “IRL” (“in real life”_ work.
NFTs (non-fungible tokens) are digital assets that are provably unique and non-interchangeable (not “fungible”). This makes NFTs ideal for documenting the digital asset ownership of assets like a digital rendering of your physical CryptoPunk NFT pendant.
Phygital NFTs are drawing the attention of business and brands, as they have the potential to be the building blocks of innovative and creative brand experiences, with the luxury goods sector leading the way.
Why Phygital NFTs Matter for Luxury Goods
Luxury goods are items that may not be critical for “everyday” life and are purchased for their perceived value, quality, exclusivity and cultural relevance.
While the definition of a luxury good can be subjective and personal, luxury goods are commonly understood as a way to demonstrate wealth, taste, and as a “flex” of social status.
Authentication and avoiding counterfeit items is a significant issue in the luxury goods ecosystem. With a phygital asset, ownership of a luxury good can be stored on a blockchain, and NFT ownership can be easily authenticated and transferred, making phygital NFTs ideal for people who want to buy and sell luxury items.
When an NFT is created, information about the asset is stored on the blockchain, including information about who created it, when it was created, and how it has been transferred between owners. This transparency can help to build trust between buyers and sellers in the luxury goods.
NFTs and phygital assets will help luxury good brands enable new and exclusive experiences for their audience, and increase customer loyalty and retention
Phygital NFTs have already been used to connect digital and physical assets for a number of luxury goods brands, including the following examples.
Prada’s NFT Journey x Time Capsule
Prada is a global luxury fashion brand with a history of creativity, innovation and experimentation.
For its first NFT experience, Prada collaborated with Adidas’s Into the Metaverse NFT project on a uniquely interactive artwork.
In June 2022, Prada launched its own NFT collection, using NFTs as a complement and extension of its existing Time Capsule limited edition clothing drops program.
The phygital connection?.. buyers who snagged a Time Capsule shirt during the June monthly 24-hour sale period were gifted a Prada NFT that authenticated their item by a serial number and promised future utility and benefits. The limited editions shirts were designed with Cassius Hirst (son of artist Damien Hirst), who had previously collaborated with Prada on a limited edition series of sneakers.
Next, Prada took the bold step of gifting NFTs to customers who had already purchased a physical Time Capsule item prior to June, a gesture to bring its Web2 customers closer to Web3.
“Rather than targeting a new market, Prada is rewarding its already loyal and more traditional clients who have supported it from the outset, integrating its NFT strategy into a pre-established physical initiative at the same time.”
The first IRL perk? An opportunity to attend Prada’s fashion show in September during Milan fashion week!
RTFKT Studios and Nike AR Genesis Hoodie — Web3 Phygital Luxury?
Can a hoodie be a “luxury” good?
Luxury may be a subjective classification, but a floor price of 8.3 ETH (now 8.9) for a Clonex x Murakami NFT as an entry point is not a budget expense.
The RTFKT Nike AR Genesis Hoodie will come with a built-in NFC (Near Field Communication) chip, enabling its wearer to link it AR (augmented reality) experiences in the Metaverse and future in-real life events, truly “twinning” the digital and physical items to each other.
RTKFT, the digital artifact studio acquired by Nike, recently teased an upcoming drop collaborating with the Swedish luxury perfumery Byredo that will enable holders to “forge” a unique perfume and “unlock” another digital wearable, further enhancing both digital and real-life experiences.
Truly “Liquid” Assets — BlockBar and Phygital NFTs
BlockBar calls itself the “world’s first NFT marketplace for luxury wines and spirits.”
By using NFTs and blockchain technology, BlockBar addresses common problems for buyers of luxury spirits, and luxury goods in general, not just “in Web3” but a broader audience.
By transacting through BlockBar, buyers can be confident of the authenticity of the goods purchased.
BlockBar also manages the proper storage of spirits, keeping them secure, protected, insured and with appropriate climate controls, a unique utility and benefit of holding the NFT backing the liquid asset.
When you want to consume or sell your “asset”, BlockBar handles the transactions and logistics through a blockchain transaction, including royalty splits between BlockBar and the producer, and the promise of safe and secure shipping of your “liquid” asset to your door.
What are the challenges with Phygital NFTs?
Phygital NFTs are a new and exciting way to participate in the digital and Web3 world, but they come with some unique challenges.
Most digital assets are not yet regulated by governments or financial institutions. As a result, there is a lot of uncertainty about how they may be taxed or managed.
Digital assets may be stored on both centralized and decenralized platforms that can be subject to issues or constraints, including compliance, KYC and global sanctions.
This means that buyers of phygital assets may not be able to recover their losses if something goes wrong, such as a digital wallet issue.
Finally, phygital assets can be difficult to value due to their unique nature.
By combining the best of both the physical and digital worlds, NFTs have the potential to change the way we interact with our belongings. As the technology behind NFTs and phygital assets continues to evolve, the potential uses for these innovative technologies are only limited by our imaginations.